Vat Question Please

jozvaldo · 5 December 2018 at 9:40PM

We are a small business who isn’t VAT registered and we buy goods from our supplier which we pay VAT on. We then absorb tha VAT and take a loss on our profits (ie we don’t charge the customers who we supply to any VAT). We have recently sent an email to a customer waiving them a total price with the words VAT inclusive) next to it but no breakdown of VAT as we aren’t charging for it.

The customer has passed this email onto their plumber who has then paid us for the goods we have supplied. We then invoiced again with no breakdownof VAT mentioned. The plumber has then decided to deduct 20% from the total amount and only charge for the reduced value as he IS VAT registered.

He is now asking for us to refund the 20% he has lost out on because we used the wording of VAT inclusive in our email.

Could any VAT experts confirm where we stand as we believe this is the plumbers error??

Hope this makes sense.....

Thanks

BoGoF · 5 December 2018 at 9:48PM

I would say it is mostly your error. Why even mention VAT on the e-mail if you are not registered?

theonlywayisup · 5 December 2018 at 10:21PM

You aren't VAT registered therefore there is NO VAT, inclusive or otherwise, it should never have been mentioned on the invoice.

VAT inclusive to me means you have given me a total amount INCLUSIVE of VAT. Therefore if I am VAT registered I can reclaim that VAT.

Your error.

antrobus · 5 December 2018 at 11:13PM

jozvaldo wrote: »

....

The customer has passed this email onto their plumber who has then paid us for the goods we have supplied. We then invoiced again with no breakdown of VAT mentioned. The plumber has then decided to deduct 20% from the total amount and only charge for the reduced value as he IS VAT registered....

Your customer is your customer. If, at their request, you re-invoiced their plumber for the same goods, the plumber can only reclaim VAT on a valid VAT invoice. One that, for example, shows the supplier's VAT number, amongst other things.

If the plumber has sought to reclaim VAT on an invoice that clearly is not a VAT invoice, that's his or her problem.

00ec25 · 6 December 2018 at 6:07AM

jozvaldo wrote: »

We are a small business who isn’t VAT registered and we buy goods from our supplier which we pay VAT on. We then absorb tha VAT and take a loss on our profits (ie we don’t charge the customers who we supply to any VAT).
that is poorly worded
you are not VAT registered, so VAT does not exist as far as you are concerned and should not be mentioned at all

We have recently sent an email to a customer waiving them a total price with the words VAT inclusive) next to it bad mistake. It is not inclusive since you are not allowed to refer to VAT all all since you are not registered but no breakdown of VAT as we aren’t charging for it.
indeed, you are not charging VAT, you are not registered to do so. You merely have an invoice price, you have not "waived" anything, you have merely set a price

The customer has passed this email onto their plumber who has then paid us for the goods we have supplied. We then invoiced again with no breakdownof VAT mentioned. The plumber has then decided to deduct 20% from the total amount and only charge for the reduced value as he IS VAT registered.

He is now asking for us to refund the 20% he has lost out on because we used the wording of VAT inclusive in our email.

that was his own fault then since as a VAT registered business he is expected to know exactly what a valid VAT invoice looks like and to only reclaim input VAT when he has one such invoice - yours patently was not a valid VAT invoice, despite your error in wording used.

Could any VAT experts confirm where we stand as we believe this is the plumbers error??

yes, the plumber is at fault and it is him who HMRC would penalise for falsely claiming VAT

you on the other hand would get a telling off from HMRC for sloppy wording on your invoices as you are not blameless, but neither are you liable for the plumber's own error

Pennywise · 6 December 2018 at 8:56AM

antrobus wrote: »

Your customer is your customer. If, at their request, you re-invoiced their plumber for the same goods, the plumber can only reclaim VAT on a valid VAT invoice. One that, for example, shows the supplier's VAT number, amongst other things.

If the plumber has sought to reclaim VAT on an invoice that clearly is not a VAT invoice, that's his or her problem.

But by using the words "vat inclusive", the OP has shot themselves in the foot as that has a clear meaning in the VAT world as being x amount plus vat. The customer and/or plumber are quite right to assume VAT had been charged and ultimately reclaimable upon production of the right paperwork.

trailingspouse · 6 December 2018 at 9:53AM

So am I reading this right? You buy something that has a VAT element included in the price - let's say it cost you £120 (£100 + VAT = £120). You then don't include the VAT element when you re-sell to your customers?? So you sell to them at £100? Why?

And then, to make matters worse, you include the words 'VAT inclusive' on your invoice, which makes it look like the £100 has an element of VAT in it?

I think there is some serious confusion here about VAT. You must, as a matter of urgency, learn all you can about VAT. It's an important subject, and one that can get you into a lot of hot water if you get it wrong - and saying 'I didn't understand it' won't be a good excuse.

jozvaldo · 6 December 2018 at 2:30PM

So - as per your example

we purchase an item at £120 (£100 +£20 VAT)

We then sell the item at say £150 (we are not VAT registered and nowhere on our website does it give any mention of a VAT element being included or charged) as we are not VAT registered so in my eyes at this point we are doing nothing wrong - correct?

The fall over here has come during email conversations where we have sent one email giving them a big discount and at the bottom of the email saying (VAT INCLUSIVE)

The invoice we have then sent out once the order has been placed on our system again has no breakdown of VAT or mention of VAT at all.

The client is picking up on one sentence in an email chain and saying that what we are doing is illegal, and the they are going to take this to the appropriate parties.......

Hope that explains a little more clearly.

Pennywise · 6 December 2018 at 4:50PM

The problem is that your email has given them the impression that you are vat registered and the £150 includes vat. As a result of that misinformation, they've assumed that the VAT on the £150 is reclaimable by them. That's the information upon which they've decided to buy your goods/services, i.e. the relevant info for the contract. The invoice is irrelevant as that's too late to be of relevance to the contract, i.e. once the sale has been made. Unfortunately, I think you have to bear the consequence of this.

jozvaldo · 7 December 2018 at 3:26PM

Yes I agree. I've taken the decision to reimburse the difference.

Thanks for all your help

Vat Question Please

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